In a second, equally explosive disclosure, a law enforcement source tells Fox News, that ATF undercover agents were acting as the straw buyers and purchasing guns using government-issued false identifications and then providing those guns to cartel traffickers to gain credibility in their undercover roles. In that capacity, the ATF "provided 2, 50 cal. machine guns to traffickers that are loose in Mexico and unaccounted for," the source said.

If true, this latest accusation means that ATF went way beyond ordering FFLs to allow questionable sales while they just watched, they actually directly supplied cartels with military grade weaponry not available through FFLs - and then lost track of the weapons.

At the time, Mr. Rodriguez was already under the scrutiny of ATF agents for possible trafficking, prosecutors alleged in the Shipley case. They were excited by the lead, authorities say, because of the short "time-to-crime" period—less than seven months between the El Paso sale and the time the gun turned up in Chihuahua. Normally that period averages eight to 11 years, an ATF official said.

In other words, all of these guns that are "flowing" to the south, the average time period between these guns being sold by an FFL and recovered in a crime in Mexico is 8-11 years. In other words, practically none of the firearms found in Mexico (with the exception of ATF-sponsored ones apparently) are coming directly from an FFL.